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Thursday 18 July 2019
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Heed the warning signs, economists urges Govt

…Namibia not maximizing SACU rebate facility

It is crucial that Namibian authorities in the economic sector safeguard investors against inflation, as it plays a big role when it comes to appealing to investors, said Frans Uusiku of Simonis Storm. “Despite recent current volatility we must be seen to be doing something at an institutional level because simply saying we have implemented fiscal consolidation is not enough,” Uusiku added. Although he remains optimistic about the future, Uusiku said the “recent upgrade should push us to do more for the economy from a fiscal and policy stance instead of sitting back.” Fitch Ratings last week upgraded Namibia’s National Rating on the South African scale to ‘AAA(zaf)’ from ‘AA+(zaf)’. The Outlook is Negative. Fitch has also upgraded Namibia’s senior unsecured bonds rated on the national scale to ‘AAA(zaf)’ from ‘AA+(zaf)’. Fitch affirmed Namibia’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB-’ and revised the Outlooks to Negative on 2 September 2016.
The upgrade follows the downgrade of South Africa’s Long-Term Local-Currency IDR to ‘BB+’ from ‘BBB-’ during the first week of April. National Ratings provide a relative measure of creditworthiness for rated entities only within the country. In this context, Namibia’s ‘AAA(zaf)’ rating denotes Fitch’s expectations of the default risk relative to other issuers or obligations rated on the South African scale. Namibia’s National Rating is sensitive to Namibia’s sovereign rating as well as South Africa’s sovereign rating. A change in Fitch’s assessment of either Namibia or South Africa’s credit quality would result in a change in Namibia’s National Rating.  Uusiku welcomed the upgrade but refused to get carried away. “If the rand depreciates or continues to be volatile it could come back to haunt us. We must remember that our bonds are denominated on those of South Africa, hence it is crucial that we do our part as a country,” he said. On SACU, Uusiku expressed concern over the fact that Namibia is not maximizing the opportunity to derive more benefits from the excise duties through SACU. “At the moment South Africa gets the biggest chunk of the excise revenue because it trades more with the world than any other SACU member. It is my hope that with the expansion of the Walvis Bay port, we will be able to attract some traffic from the port in Durban to change the situation,” he said. Uusiku also stressed the importance of ‘market sentiment’ in the economic narrative.

SACU rebate
Maria Immanuel, a Senior Trade & Investment Analyst at Namibia Trade Forum, has indicated that Namibia hardly uses Rebate facilities provided for in the SACU agreement of 2002 as a policy instrument to stimulate the creation of manufacturing in the country.  “In fact, it’s only South Africa in SACU which has actively and continue to take advantage of rebates to support and promote industries and other developmental projects.  The entire automotive industry supply chain in South Africa is built on rebates, in fact, both the Gautrain and the 2010 World Cup infrastructure also benefitted largely from rebate facilities,” she said. The main objective of rebate provisions in SACU is to provide a customs duty waiver on imported goods meant to be intermediate goods for both industrial and agricultural production. If the SACU market is unable to produce or insufficiently produce products required as an industrial or agricultural input for certain critical applications, or capital item, and such products attract an import duty, a rebate facility can be created to give relief to manufacturers when importing such products for their production purposes.   According to ITAC, industry may also apply for a rebate or refund of duty on inputs used in goods destined for the export market. The rebate or refund of the duty levied on inputs used in exports is an incentive for allowing manufacturers to source their intermediate material and component inputs at world prices. ITAC is the International Trade Administration Commission of South Africa which is also the de facto institution managing the tariff system in SACU.  In other words, every rebate, drawback, tariff increase or decrease is effected under ITAC processes as they have the mandate to represent the SACU tariff board as per the SACU agreement of 2002.

“It is important to note that, because SACU has a Common External Tariff (CET) which governs the ‘customs union’, all members of SACU, Botswana, Lesotho, Namibia, South Africa and Swaziland have one custom’s and excise tariff book, and products imported by any member pays duties only once at the port of entry (which can obviously only be either through South African ports or Namibian ports), and because this makes SACU a single’s customs territory or ‘one market’, products then move freely between SACU members without paying any additional custom’s duty.  This simply means, if you import chicken from the EU through the port of Walvis Bay into Namibia, you can export those chicken to other SACU members without again paying customs duties at border of the country of destination,” she said. Namibia so far has only utilised rebates on wheat and dairy products, said Immanuel.
A wheat rebate in SACU was created in 1996 after South Africa’s move to deregulate the wheat sector.

“Generally, SACU does not produce sufficient wheat and after SACU implemented an import tariff to protect SACU producers, who are mainly South African producers, it negatively impacted on Namibia because Namibia is a net importer of wheat and this decision affected Namibian industries because they needed to source wheat from the rest of the world to produce value added wheat products such as pasta,” she added. The creation of the wheat rebate facility to Botswana, Lesotho, Namibia and Swaziland (BLNS), was to allow BLNS countries to diversity their economies, compete with foreign products in their domestic market and ensure national food security through the marketing of affordable wheat and wheaten products to consumers.   “Namibia’s wheat rebate quota in 1996 was set at 50 000 tons per year, and it was increased to 80 000 tons per year which is the current existing wheat rebate quota.  The increase was a result of the increase in domestic demand.  Namibia is again requesting this quota to be increased to 120 000 tons per year to make sure the local demand of wheat is met.  This proposal is still under SACU processes for consideration.  This wheat rebate facility is currently only utilised mainly by companies producing pasta and other wheaten products.   The dairy industry is also utilising a rebate facility and for Namibia, the dairy rebates are 400 tons for butter, 300 tons for cheese, 700 tons for skimmed milk products and 400 tons for whole milk products to be imported per annum,” she said.




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